In the near future, the stock price is like blindfolded on the roller coaster, passengers’ heart has always been suspended in the throat, because do not know when the stock will come to a big dive.

Reviewing the first twenty years, the core players of concept shares mainly rely on the dividend of users to flourish, the “black Swan” event let c-end enterprises suddenly collective fell down, many people found the importance of ToC and ToB “two legs” to walk.

Beyond the black Swan event, does this signal the end of the golden decade of the Internet, with its demographic dividend and infrastructure boom?

Again, the answer is no.

It should be said that the era of making money lying on users has quietly changed. After the dilemma of C end, when the track turns To B, competitors have To run for growth and profits.

To C market saturation, Internet To B inflection point or has arrived

The Internet was wild from the start.

In 2012, the number of mobile phone users in China surpassed PC users for the first time with 420 million. Coupled with the rapid penetration of hardware, the door of the ten-year carnival of Internet enterprises opened.

In the middle of the process, the Internet has revolutionized most fields, from social networking and e-commerce to video and finance. In the process of its savage growth, “parents” have given enough room for growth, rather than “caring” for the new energy industry.

Until this time wrestling, bystanders suddenly realized, “wild children” also want to speak rules.

In terms of user mining, the C-end has long been approaching the limit — Quest Mobile’s 2020 China Mobile Internet Annual Report points out that the current stock of Mobile Internet users in China is as high as 1.155 billion, and the Internet has accompanied them from birth to departure. On the one hand, the baby bus, the leader of early childhood education, has tens of millions of users, and on the other hand, various apps carry out age-appropriate transformation. The Internet is not going to be able to give birth education all at once.

The disappearance of flow bonus is accompanied by the rise of manpower cost, management cost and the emergence of large-scale party A.

The former is easy To understand. After the comprehensive cost rises, enterprises choose To shift some jobs from self-operation To outsourcing service, which gives To B industry opportunities. The latter means that the number and financial capacity of party A is becoming stronger and stronger, and they recognize the value of the service provided by the enterprise. Only when someone pays the bill can the market continue to develop.

In short, cost reduction and efficiency increase has become one of the main themes of many enterprises. SaaS, or the SaaS of traditional software, plays a core role in this B-end efficiency revolution.

To B Internet, SaaS master ups and downs.

The acute sense of capital confirms this: the continued hot SaaS concept since the epidemic broke out at the beginning of 2021. From January to February, the stock prices of The two leading SaaS companies, Wemeng and Youzan, doubled in Hong Kong, and the IPO subscription of The leading healthcare SaaS company, Yidu Technology backed by Tencent, set a new record.

A-shares, enterprise-class SaaS leading Youyou network, building information SaaS leading Guanglian, super integration and information security leading manufacturer shenxin and other enterprises have stood on the year’s peak stock price, financial cloud SaaS manufacturer Hang Seng electronics, collaborative office software giant Kingsoft office and other components also perform well.

SaaS weak water three thousand, capital did not intend to only take “a ladle”, they all want, of course, this also buried the follow-up round of market flameout hidden trouble.

Two days ago, the Cyberspace Administration of China (CAC) released a draft of the Internet Security Review Measures (Revised draft for public comments), which has once again erased a spark.

According to the measures, operators with personal information of more than one million users who want to list overseas must report to the Cyber security Review Office. Tighter data regulation has put more US listings on hold.

Another good news also comes from the policy. The RRR cut across the board has sounded the horn of reducing the operating costs of the real economy, which is interwoven with the sound of anti-monopoly.

In the U.S., Shopify helped sellers “revolt” against Amazon, Square and other services, empowering small and medium-sized businesses with financial instruments, but in China, the giants are used to doing a whole bunch of things.

Now, the key of the policy or will open the door To B small and medium-sized enterprises, through the digital help entity enterprises To reduce costs and increase efficiency, a new opportunity has been brewing in the Internet track, SaaS industry spark is about To start To beat.

Therefore, at present, the prospect of Internet To B is rare in the history of industrial development.

From industry To valuation, why is To B a good business?

In China, Internet players will catch up with the early adopters of SaaS, which is first and foremost a good business.

According to Gartner, the global SaaS service market was usd 102.1 billion in 2019 and is expected to grow to USD 138.3 billion by 2022 with a CAGR of 11%, which is a gold mine with steady growth.

The pace of the Chinese market is slower, iResearch consulting released “2020 China enterprise SaaS Industry research Report” pointed out that in 2019 China enterprise SaaS service market scale reached 5.1 billion DOLLARS, is expected to 2021, China SaaS market will reach 9.8 billion dollars, accounting for 8.32% of the global market.

Slower is not necessarily a bad thing, at least we stand on the same starting line, but also fewer pits.

SaaS is also a valuation weapon, enterprises at ease, investors at ease.

In recent years, the U.S. stock SaaS track hot to 10 billion as a standard is not enough to look, software service subscription pioneer Salesforce is about 220 billion dollars in market value, Mizuho bank analyst Gregg Moskowitz said, Salesforce is well positioned to help manage revenue and streamline processes for its large customer base through digital transformation, Morgan Stanley analyst Keith Weiss said, adding that Salesforce’s earnings momentum is strong.

Among the new peak leaders, Shopify is valued at around $180 billion, Square at around $110 billion and Zoom at around $110 billion.

Why do they get such a high market cap? In terms of revenue quality, the SaaS industry has four characteristics.

· High Gross margin: SaaS businesses have a low cost of revenue because there are few implementation costs for software deployment, so gross margins remain high. In the first quarter of fiscal 2022 (ending March 31, 2021), Salesforce reported gross profit of $4.4 billion on revenue of $5.96 billion, with a gross margin of 74%.

· Sustainable revenue: Similar to repurchase, software is a high-frequency service. As long as the enterprise decides to deploy or purchase, a service will get a lot of repetition and continuous use. Shopify’s storefront base for small and medium businesses is the foundation of their business, and that revenue won’t leave Shopify until a new competitor offers a more attractive offer.

· Paid retention rate over 100% : Enterprise users value stability more, redeployment will cost a lot, and it is not conducive to the operation and production activities, so as long as there is no problem with the initial use, there will be a strong dependency relationship. In particular, the SaaS industry has a significant concentration of large customers, who pay more attention to the quality of service and are more willing to pay for it.

· Highly Productized and easy to expand: it is easier for the software industry to scale, and the marginal cost soon enters a stable period. Zoom enjoyed the epidemic dividend and entered a period of rapid expansion. The operating cost of Q1 in fiscal year 2021 rose from 32 million US dollars in Q4 in fiscal year 2020 to 100 million US dollars. However, the cost of revenue tended to be stable when the subsequent revenue continued to grow. In Q4 2021 and Q1 2022, Zoom’s cost of revenue was $270 million and $260 million, respectively.

After all, To B is not Aladdin’s magic lamp. Enterprises can realize three wishes by rubbing their hands.

The Internet industry To B development of three main lines

Some time ago, byte was reported that Byte Cloud will be launched, similar to Tencent Cloud, Ali Cloud, Amazon, Microsoft and other giants, such a road from the existing business to b-end business is easy for the giants, to a certain extent, like SalesForce, through mergers and acquisitions to consolidate their own foundation.

However, this is not the only choice for Internet To B. There are three players on the track: transformation of traditional software vendors, crossover of giants and breakout of small and medium-sized enterprises. There are also three Bridges across the river of SaaS:

The first bridge is: domestic system software replacement

The primary level of software is the application level, such as kingsoft office and collaboration software and pan-micro OA system, while the advanced level is the basic level, such as Huawei Hongmeng system. They both have the same point: long-term investment in research and development, and the establishment of a complete market system. Only when the wheels of the business model turn, can the business car continue to operate, which is not easy in the current environment.

But the momentum is there and it must continue.

The second bridge is: lower physical operating costs

The Internet and the financial sector have been calling for many years to nurture the real world. This comprehensive reduction of the required reserve ratio is a clear signal. For Internet companies, what needs to be done is to accelerate enterprise digitization. The opportunity is to go SaaS in software, which is a more lightweight solution. The cloud computing background can also reduce hardware expenses.

The risk is that, in the past, only the giants could get a slice of the pie, so the policy changes the rules of the game a bit.

The third bridge is: the giants to win-win cooperation

Dingduo, Feishu and wechat may all have their own ideas, but a thousand flowers will bloom together, and the rise of third-party services will replicate Shopify’s rivalry with Amazon. Shopify’s founders said they wanted to arm the amazon rebels, but the two are now working well together.

The reason is that different service systems do not have to be in opposition to each other. The assumption is that functions exist and are open to different players, the former driven by the market, the latter quietly maintained by the other hand.

These are the three main lines of China’s Internet To B, which can be said To be logic and principle, as well as strategy and method. But certainly, there is no race, can reach the end of the road too many thorns, good luck to them.

conclusion

Finally, we should also vide Internet enterprises. The investment cycle of To B is too long, and without solid family background or lucky enough development opportunities, it will soon be shot To death on the beach. Ma Huateng proposed in March 2019 that consumer Internet should be iterated to industrial Internet. Players are not ignorant of the importance of B and C lane changes, but lack of better opportunities.

So now it’s not so much a lane change as an opportunity, and they’re done watching and learning and trying to do a better test.

When it comes to social progress, investors in the developed world place a much higher premium on the concept of “service” than we do. In the short term, China’s SaaS field valuation may be difficult to directly standard American stocks, but do not deny the future of the forest because of the slow growth of a tree.

In June this year, Tang Bin, CEO of E-Pay, said at the 2021 Chinese Enterprise Competitiveness Summer Summit, “Ten years ago, the MARKET of To B in the United States and To C were almost equal, while the market of To B in China today is only about 1/10 of that of To C.”

SaaS has blown the first wind, even if it is still cold, the spring of Internet To B is finally arrived.

Article | U.S. stocks club (meigushe)